Hi Friends
Would anyone be able to comment on
Q : How much should a company invest on an erp for retail business against its turnover?
Q : After implementing the erp, what should be the per cent of its on going maintainance against its net profit?
Any advice will be highly appreciated!
Thanks

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This is an easy one - plenty of industry benchmarks out there.
Most companies tend to have a budget of around 4% of turnover for
implementation, with implementation times running from 6 months to 3 years
or more. (So already you have a TCO variance of 6 times or more, vs a simple
year on year figure against turnover)
Support and sustain tend to be around a quarter of that.
But these are simply some industry averages - it always need to be about
*YOUR* business case - not what the chap next door did (or did not) do.

Trying to recommend a solution to even *start* looking at given the
information you provide would be dangerous, misleading, and unprofessional.
SAP AIO, one of the MS stable supported by a gold partner VAR who has
tailored for retail, or any other of 20-30 possibilites spring to mind. But
really, you dont want to be betting the future of your company on some
advice you got off a forum - no matter how good.
I do however find it hard to believe that you would need to customise up to
40% of any solution, i must say.
There are *LOTS* of packages out there that cater quite nicely for retail,
including the standard POS, basic accounting (GL, PO, SO, etc) and so forth.
The manufacturing sub-contracting area is the one i would want to watch, and
would probably end up de-coupling this, depending on how deep a level of
control you need to keep over it. The more in-house and managed it is, the
less you can decouple of course.
You doing sales-driven JIT type product re-supply? If so, whats the lead
times?

Nic advised you rightly, The information is not sufficient to suggest for an ERP solution. Let me point out Your concern:

1. Budget for ERP based on Revenue: ERP is a business application tool, is is not guarunteed that you will get benefitted by ERP until it is well implemented and used by your organization. There is misconception poeple think ERP will increase their revenue, the fact is that by using ERP you can grow your organization. It depends how you use it... Budget depends on business and futuristic plan of the organization. There are many companies having turn over 1000 million even not using ERP but there are companies having turn over only 10 million but using ERP. So its your business plan that will decide the budget of ERP.

2. Post implementation maintainance: It depends upon the ERP. if it is onsite then average AMC is 20% and upgradation charges may vary from 5-10%. At onsite model you also have to pay for IT Manpower, hardware, server, System software with AMC.

It seems you want to mininze the risk of ERP investment. Then you can start with On Demand model (subscription based) which does not require any IT infrastructute and manpower. Once you use it for sometime then you can shift for Onsite model.

3. Customisation 30-40%: Your requirement is very common. Almost all ERP has the functionality you need. At maximum 5-10% customization will be required. Even the Ondemand model has your complete requirement like RamcoOnDemand ERP.

4. Approx Cost: As per requirement, if you start with 5-6 users then the Ondemand subscription will be only 500 USD / month approx. There is no investment or AMC with this application. There is one time implementation cost which depends upon your business process and various factor. If you go for the onsite model for 5-6 users it will be approx 30000 USD + AMC (20%)

There are many other factors which will decide your ERP. If you give the complete information RFP, only then right solution can be suggested.

Dear Himanshu,
Kaifee is absolutely right. These things should be considered before going
for ERP other wise these will become pain for you. However, We are providing
such on Demand solution to customers. We try to provide a 360 degree
solution to customer which comprises POS, ERP, CRM, HCM, PLM, e-COM (with
i-Supplier module). If you are interested we can have at lk on this.
Regards
Jayashis
9109836367317

For a mixed retail/manufacturing organization I would suggest you look at the Microsoft Dynamics AX product. Make sure you deal with one of the channel partners that have a retail vertical. Bringing the solution in house will give you complete flexibility and control, while the cost point for the solution to be less expensive than a SaaS solution is typically out in the 2.75 year time frame. If you find that the system will require 30% to 40% cusomization, it is the wrong package for you. Keep looking, you will find a much better fit!

At 06:52 AM 1/5/2010, bcary via erp-select wrote:
>For a mixed retail/manufacturing organization
But they never said that. In fact they've never really said *anything*.
As Nic has been trying to point out, any suggestion at this point is
not right. We need to focus on asking the questions that bring out
what the real requirements are. Otherwise the selection process
will continue to be broken.

At 05:24 AM 1/5/2010, Kaifee via erp-select wrote:
>Nic advised you rightly,
I agree.
>The information is not sufficient to suggest for an ERP solution.
Yet you do that later in your message. Which is it?
Can you really make a suggestion or is that unprofessional
and dangerous as Nic said??

>There are many other factors which will decide your ERP. If you give
>the complete information RFP, only then right solution can be suggested.
A well written RFP can be part of the process. But even then I
will also disagree that it's enough to make the right suggestion.
There is more info required than what can be put into an RFP.
It's only potentially part of the process. (it's not required
either - there are other ways) There has to be a bi-directional
flow of information between vendors and the prospects.

Geoff,
The following is an excerpt from one of Himanshu's posts; "Any erp we select, we need to customize at least 30 to 40 percent of the erp areas including Retail POS (calculation customization) GL, PO, SO, Sub contract - Manufacturing, and at last reporting.". So yes he did say it is a mix of retail & manufacturing. I agree that more details need to be ferreted out to select an appropriate package, but that is not something that will be done in a blog. The retail/manufacturing mix does at least point one in a general direction.

Inventory : we have three major types of inventory. Gold/Platinum Jewelry,
Precious Jewelry (Diamond, color stores, pearl finished jewelry) & Loose raw
material (Diamonds, color stones, pearls) used for issuing to sub
contractors to deliver orders. That could be for make to order or make to
stock.

When we purchase gold jewelry in grams, we purchase gold + making charges
per gram on the same line item where in the totals for gold is separate from
totals of making charges.

Same applies when we sell as well.

Due to this reason we have serious customization taking place.

We would like to have about 20 attributes for an item set in a hierarchy.

In gold business we have purchasing of gold at unfix price and then fixed on
a future date. (this is another area of concern)

Bank : Normal, but with Post dates checks.

GL : we have 5 companies dealing in the same business, one holding company
has centralized purchase which supplies to all other companies, we have
centralized purchase & decentralized sales. We would like to have
intercompany transactions. We would like to consolidate as a group or as a
company.

AP : Payables would be managed from HQ, as all purchases are done here and
then transferred to respective stores for sales.

AR : This should be store wise/customer wise. Limits should be set from HQ,
mostly all wholesale dealings are done thru HQ.

Service Management : servicing customers item or servicing in-house stock,
or servicing items sold to customer in the past. Should be managed from POS
level with workflow from retail outlet to HQ to Sub contractor to HQ and
back to Retail outlet, status should be updated on the system.

CRM : management of customers, sending them updates of new items based on
the preferences of their past purchases. Management of service items thru
CRM, management of make to order items and sending emails to customer when
the item is ready. Cross sell, upsell. Creating a list of potential
customers and trying to upsell them.

BI : having an analysis of stock available in stores distinguished by item
attributes, sales analysis by customer, by vendor. Understanding the
performance of the company.

POS : tightly integrated with AX, should be able to take multiple tender
types, multiple currencies, we buy old gold from customer and in exchange
sell our stock item, at POS level that should be possible.
Gold/Silver/Platinum prices to be updates to all stores with the help of HQ.
prices cannot be changed by store. Layaways, credit sales, service to be
done from POS.

Sub Contractor: wherein we issue raw materials to sub contractor and he
makes the item and we pay him making charges, Polishing charges, basically a
BOM should be managed.
Component wise revaluation of stock should be possible, revaluation should
be able to be done every quarterly. Revaluation should be done based on the
component size (eg if a diamond is of ½ carat with G Color & VS quality one
price will be applicable, if another ½ carat stone is F color with VVS
quality another price should be applicable.)

Warranty : Able to manage warranty for customers, if they buy that separate.

All components will have a lot of attributes as well, there should be a
possibility to add these attributes in every line item.

Consignment : consignment in of loose raw materials are received from a
supplier to make new stock or for customers order or service item, if stock
is used invoice it or else return consignment.
We do consignment of Diamond Jewelry & Gold Jewelry as well.

Work Flow : We would like to have process flow when it comes to movement of
inventory & cash. From one store to HQ or one store to another store.

Ummm... *subcontract* manufacturing does not need to be a
manufacturing/retail mix.
Which is one of the areas that alarmed me - what exactly might it mean?
The orginal poster now has a very (VERY) rough idea of the amount of money
they might need to set aside for the next periods budget.
Next steps would be to look at business process, possibilites of any
automatic data capture (in retail with high volumes and low margins, you
want as much of this as possible) and start building a modular business case
and ROI model.
With that in hand, you have a fair chance of bringing in an expert resource
for just 1-3 weeks initially, to get the ball rolling.
Anyone who knows what they are doing, armed with the above, should be able
to shortlist down to 10 or so likely suspects.
This shortlist should get an RFI (*NOT* an RFP) which should further narrow
down the field to 2-4.
Then, apply your business case to a fit-gap, and a *detailed* (i mean
task/activity WBS detailed) RFI and implementation plan for *your* business.
Engage further to refine this with a *GOOD* SI partner who specialises in
the system you have pretty much chosen at this point.
Bring back the clever fellow who helped you out earlier, at least 1-2 days a
week, to keep an eye on the SI partner.
Then start working on the all important training/re-training and
organisational change plans (from strategic through to procedure-specifc
tactical)
Do all the above right, and you have an excellent chance of getting 100% ROI
within 12 months of hitting the ground.
Fail to do *any single one* of the above steps, and my money is on your
failing like around 80% of ERP implementations fail... if you are lucky (if
you not lucky, you get to join the ranks of the 20% or so who have actually
gone out of business due to messing this up)
So consider that for a moment:
You are willing to embark on a journey that has a one in five chance of
ruining your company. And all this for some as-yet-undefined business
benefit?
You *sure* you want to rely exclusively on free advice from people you don't
know, on an internet forum?
If you like, print this out, highlight the last scentence with a yellow
marker, and give it to your CEO. Because if you have said "yes", he next
rational action should be to fire you...
On the other hand, it might motivate him to authorise a bit of budget to pay
for 3 weeks of an experts time on this...
On the other hand, it might motivate him

Right, thats a lot more detailed.
And the jewelery industry is *NOT* your standard retail environement:)
Out of all your list of broad functional areas where you have concerns, most
of them are bread and butter to almost any tier2 ERP system.
(In fact, i know 3 popular tier2 ERP brands that have had Gem&Jewelery
customisations done to them to porvide an industry-specific solution.)
The ones i would keep an eye on are the following:
BOM flexibility and projectsystems MTO/ETO functionality.
You dont mention your location, the average value of a piece, or several
other key factors, but i'd be looking for a solution that could tag and
store digital images of pieces, plus associated records for the making of
each piece. (Amongst other things)
If its lower value higher volume in the main, you could probably not worry
too much about this.
BI/CRM
Thisis where you are going to find the biggest value-add.
Knowing who you sell what to will earn you the money - most of the rest of
what you describe is going to gain you small percentage points in stock,
time-to-delivery, customer satisfaction due to efficent POS and front-office
work, etc.
The BI/CRM component can give you serious step-change however.
The rest, to be honest, is pretty standard stuff.
But nevertheless - as per my last post, there is a journey to go through to
make sure this is done as well as it can be.
Looks like you have started thinking about the right things though, well
don.
PS:
I would counsel that you steer clear of hierarchical fixed attributes (I
assume you are taking about is BOM inputs/outputs?)
multi-dimensional, yes - strictly hierarchical, no, unless 99% of your
business is more generic wholesale work...

I agree with Nic that jewelry gives it a whole new twist. Usually have dual unit of measures, gold adder for pricing, etc. Definately want to take the suggestion of focusing on providers that have addressed the jewelry industry with their applications.

Hi all,
an other solution actually used by a french jewellery company called Orest is
Baan They use this erp for all the following task of a manufacturer.
Could you maybe ask them what they thinks about it.......
Pierre-Michel

At 11:44 AM 1/5/2010, Nic Harvard via erp-select wrote:
>Right, thats a lot more detailed.
>And the jewelery industry is *NOT* your standard retail environement:)
Clearly. And it brings out just how a list of modules isn't any real
judge of what the requirements are.
>Out of all your list of broad functional areas where you have concerns, most
>of them are bread and butter to almost any tier2 ERP system.
>(In fact, i know 3 popular tier2 ERP brands that have had Gem&Jewelery
And at least a half dozen jewelry specific solutions
that aren't add-on's. I agree with all of the assessments
you made, and have to wonder what systems were looked at.
I can't agree with any characterization that a system
made for jewelry of any time is going to be all that kind
of customization. It looks like all that was looked at
was the out of the box type retail system that knows
nothing about the industry. That may well be brought out
from the last time this was brought up - about a year and
a half ago - because it sure looks like the *exact* same
business, and they didn't take the same advice last time.
But most of all back to the original post - I would think
an adjustment of the orginal numbers would be in order.
It's not that you weren't right the first time around by
saying there's probably industry specific benchmarks for it.
But knowing now it's one of those high priced item businesses,
you could spend way less of a percentage on your system.

I have also noticed, once a industry vertical is built, the core erp is lost and most of the transactions are done outside the erp due to industry specific customizations. The quality of the erp goes down.

At 04:36 PM 1/5/2010, hkwaya via erp-select wrote:
>I have also noticed, once a industry vertical is built, the core erp
>is lost and most of the transactions are done outside the erp due to
>industry specific customizations. The quality of the erp goes down.
>
>what do you guys this about this?
Yes, that can happen. However, you make it sound like that always
happens and clearly that is not the case. In general, the better
the API, the better the ability to create an add-on. There are
good ones, and there are bad ones. It is not so easy to generalize
them.
If any "transactions" are done outside the ERP, then you have
the wrong product. But let me define that as to say the a transaction
is something the original ERP was designed for. In other words
if there is a Purchasing system in the original, they you have to
have PO's go through the original system. If you have an A/R
system, then Invoices need to be posted to the original A/R.
Even if that means that are additional structures underneath
the covers that only the technicians know about/use/etc.
If things are so off balance like you're describing, then I
would say it's the wrong product. Anything that needs 30-40%
customization is the wrond product.

At 04:42 PM 1/5/2010, hkwaya via erp-select wrote:
>how difficult do you guys see this to fit on Ax 2009 ? do you see Ax
>a good fit for this industry?
I suspect you already know the answer. You've been mentioning
it now and in the past. You also mentioned your requirements
of the product lines you deal with and the specific pricing
and manufacturing issues you have. Out of the box are they in
AX?? That alone should tell you.
Now that doesn't mean there might not be an add-on that makes
use of AX out there. But that is *not* "AX", it's the other
company's solution that has been built on top of AX. You
need to evaluate it by evaluating the company that makes it
and it's fit as a whole product.
Personally I think the whole is more than you need in terms
of the size of solution. (you have high $ products and not
as many people/locations as you might expect) Plus I think
there are more industry specific solutions out there. But
you're the one that knows the real requirements. You're the
one that's got to do the review and see the fit.
Do you belong to a jeweler's industry association? I'd bet
if you went to one you belong to you'd instantly get a decent
list of software players just like that.

No, that should not be the case.
An industry vertical ought to add extra functions and abilities to the core,
while supporting it.
If you have seen differently, you have seen a broken implementation.
Now *HOW* it got broken, is anyones guess. Its almost as likely to be in the
training/change mgt side as in the code/system

I agree there are industry solutions built on Foxpro or VB, slow systems,
difficult to get the output as you require, unstable database, high
corruption rate.

I currently use a Foxpro system with Foxpro database built according to
industry specifics. Using the same system from 8 years.

Now I need a better system. I don't deny Ax could be too big of a system for
our company. But at the same time its wiser to get a little bigger system
from what Microsoft plans to bring in retail as well.

At 05:51 PM 1/5/2010, hkwaya via erp-select wrote:
>I agree there are industry solutions built on Foxpro or VB, slow systems,
>difficult to get the output as you require, unstable database, high
>corruption rate.
Those are some technical issues, and something like
Foxpro has nothing to do with it.

>Now I need a better system. I don't deny Ax could be too big of a system for
>our company. But at the same time its wiser to get a little bigger system
>from what Microsoft plans to bring in retail as well.
It's perfectly OK to plan for the future. But you're
still no where needing that.
>I don't know the answer to this!
But what I was referring to you did know and you said that.
I was saying about whether AX was a fit or not. You said -
"I haven't seen good industry solution built around Ax. "
As for the answer to how to pick the solution - between
Nic and me, you've been guided as to the process. You can't
pick a system from a few posts on a forum somewhere. It's
time for you to do the work. It's time for you to go out and
compare the solutions available with that list of items you
posted about how you do business. You've got all the tools
you need now.

At 06:24 PM 1/5/2010, hkwaya via erp-select wrote:
>
>As Nic had rightly pointed out, I need to do my benefits case before I start
>anything and set my processes right and link my benefits case to my
>processes. I'm already working on my benefits case.
>
>If I don't find the vertical I need, would you guys suggest to get it done
>in phases from a vendor.
>
I understand working on your requirements. But benefits??
How can you do that without the selection process being
complete and know the product chosen??
What it sounds like you need is someone more familiar with the
process to help in it.

At 06:48 PM 1/5/2010, hkwaya via erp-select wrote:
>I'm doing process benefits case, by doing a certain process which I'm not
>currently doing, if that is implemented in a solution how much benefit will
>the business have.
>
>If the process is right, it has to be mapped on any erp that is selected,
>then do the gap and built it if not available. Get the quote for the same.
>
>Then check the viability!
If I understand correctly then, if you're doing BPE then that's
got to be complete first. You shouldn't even be looking at ERP
at the moment.

I dont agree entirely Geoff.
A good BPRe can go hand in hand with one of more capability upgrades, and
you can (if darn clever) juggle one and the other around to find the best
tradeoffs in time and benefit.
IN an ideal world, you would do your re-engineering first, then look at
support systems - sadly, most of us would be retired or pushing up daisies
if we *always* did it that way.
Mr Waya may not be experienced in this domain (and i agree, he needs some
good backup here) but hes not doing *badly* on an absolute scale.
I must also confess that i am also curious as to whether this is the same
company that posted here a year or two ago for a very similar line of
business, in a similar area. It might not be - there are more than a few in
this niche in the ME area - heck - my aunt on my wifes side of the family
runs a similar operation in the north of england:)

It was a good discussion. Now the basic requirement is given my Mr. Himanshu. The information is good enough to suggest a solution.

This is true that Jewetry companies has very complex process in Manufacturing. To take care of the Jewlery Manufacturing the customizations are required. But in this case the manufacturing is taken care by suncontractors. So the functionailty SUBCONTRACTING is key concern area.

The requirements can be taken care by an standard ERP. You all discussed about AX. Yes it can take care. but generally AX is used when the Manufacturing process is critical and no of users are more than 50. There are other ERP also available. To suggest you please let us know the No of Users, No of Locations, Locations where Implementaion will be done, No of POS and the important point is Budget for ERP. Then we can suggest you the vendors and ERPs

Your key concern of the post was Budget and Risk involved. If you talk about technically implementing your requirement then it is 100% possible with guarunteed success. But it depends on you which solution you want to go for keeping in mind the budget, initial investment, recurring cost etc.

Dear Sir,
ERP is not a short term plan, Now you at 11 user if your company is growing
then you should delpoy good erp solution for the company, generally erp
implemenation cost is 1:1 between product(application & DB licenses) &
Impemenation cost.
Regards,
Arvind Bhavsar